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Latin America

It’s been a while since the last time I wrote a post, mainly due to being very occupied at weekends and also changing jobs.

How time flies! It’s been over a year since I caught the fintech bug and my interest remains strong.

For this post (and like previous posts) I have linked my interests in the world of fintech and countries.

I’ve always had a fascination with Brazil which started at an early age from seeing their amazing squad from France ’98 to learning about the country in a Year 8 Geography class.

I was fortunate enough to visit the country eight years ago and spent a month in Southern Brazil.

So what’s the fintech scene in Brazil like? Similar to many developing countries, segments of the Brazilian fintech ecosystem is rather segmented and are more developed in some areas. Data from Brazilian Institute for Applied Economic Research (Ipea) shows that over 50 million adults in the Latin American country do not have a bank account. In addition, data gathered from Brazilian Telecommunications Agency, Anatel showed that there are over 282 million mobile activations in Brazil. Mobile is at the forefront and as a result, fintechs have therefore decided to make their services more digital and provide a sound mobile experience for the consumer.

Brazilian Fintech: Who are the big players?

So who are the Neymars of Brazilian fintech? There are a quite a few fintechs in the country, there are so many to mention with new entrants that I have mentioned the ones that have really left their mark in Brazilian fintech so far.

Guia Bolso – Brazil’s leading personal finance platform. The app has around a million users.

FoxBit – The bitcoin exchange company is the country’s crytocurrency leader.

Nubank – The São Paulo based fintech is known for its no-fee credit card that is managed via a mobile app.

ZeroPaper – A web platform that combines software and services that increase the chances of survival of micro and small enterprises. It generates detailed reports and tracks KPIs, in order for small business owners to manage their finances more efficiently.

Magnetis – In layman’s terms, Magnetis is a digital advisor which helps investors become more knowledgable about their investment portfolios.

Nibo – An online software that enables companies and accountants to manage and control their finances.

Vindi – A platform that provides invoices and payment gateways for Brazilian SMEs.

BankFacil – The concept behinf BankFacil is to provide consumer loans to Brazilians in an inexpensive way.

Bidu – The first company in Brazil to offer a smart search, comparison and purchase of insurance and financial services.

Above: The Brazilian fintech ecosystem’s segments, taken from Fintech Finance.

São Paulo: The new Latin American hub for Fintechs

The fintech scene in Brazil is booming and São Paulo is putting financial technology on the map in Latin America. Deloitte featured the city in its latest global fintech hubs index.

Brazil has more fintech startups than any other country in Latin America, with venture capital investment reaching US$161 million in 2016. (Nearshore Americas, April 2017)

Like a lot of large scale banks who are looking to transform the way they conduct their products and services, Banco do Brasil has also jumped onto the fintech bandwagon and has setup its very own lab in Silicon Valley.

Back in Brazil, the country’s largest bank is heavily working on digital innovation by organising hackathons for employees and students respectively to conducting various innovation programs.

From labs and innovation programs, events in São Paulo have also helped Brazilian fintech blossom. Previous events such as the São Paulo Fintech Summit which had a lot of speakers from various fintech companies. The general consensus at the summit was that Brazilian banks have successfully made a digital transition, but are still finding ways to improve their online capabilities and offer a great user experience.

The 2015 summit showed that despite the country’s economic and political situations, the fintech scene is ripe. The future looks bright for fintech in Brazil with the likes of Nubank that won the Marketers That Matter Award last year. The award goes to companies that have demonstrated innovation and the São Paulo company joins tech giants such as Google and Netflix on the list of winners.

Conducting business Brazil is not particularly easy with the complexity of tax and labour laws. The central bank has now made it easy for startups to collect their information digitally from customers. Luckily for the majority of Brazilian fintechs, their business models do not necessarily rely on any potential regulatory changes.

A century ago Argentina was one of the most richest countries in the world and was part of an ‘elite club’ of prosperous nations and as we have seen in recent years countries such as neighbouring Brazil overtook Britain in terms of total GDP. However, this was expected, as World Finance’sTom Bailey points out in a recent article, European nations comprise a small corner of the earth, and as larger nations turn their subsistence farmers into industrial workers (and then service sector employees), overtaking the old powers of Europe is inevitable. It is less of a fall and more of an expected correction and relative decline.

Sadly, those prosperous years of being part of an ‘elite club’ are well and truly over. Cast your minds back to 2001/2002 the Argentinian Peso lost three-quarters of its value (linked to various external shocks such as low prices for agricultural commodities and the devaluation of the Real in Brazil) and registered unemployment exceeded 25% which resulted in numerous public protests and violent scenes on the streets of Buenos Aires.

The Kirchner dynasty maybe over in Argentina, but newly elected Mauricio Macri (former Buenos Aires mayor and pictured above) has got a mammoth task of steering his country to economic safety. The centre-right leader intends to attract investment flows that will make Argentina globally competitive again.

As mentioned in Foreign Policy Magazine, Macri’s macroeconomic challenges are vast, however, and success will depend on his administration’s ability to curb a 5.4 percent GDP budget deficit (the biggest since 1982), temper soaring inflation (current annual levels are about 36 percent), and stimulate economic growth.

The question that remains in the Latin American country is whether Macri has enough time and support to put his agenda in place. Unfortunately unlike when Cristina Fernández de Kirchner was in power she had a full congress to back her, for Macri, he has less back-up when things take a nose dive. If that happens, you’ll bet your bottom Peso that Peronists will be ready to pounce.

Could Bitcoin Be An Alternative?

Moving away from the politics slightly, with a volatile currency and a string of dysfunctional banks in the country, could cryptocurrencies such as bitcoin be an alternative for Argentina?

It seems that quite a few in Argentina are pondering this very question and have already adopted the digital currency. Argentina has had the most bitcoin enthusiasts per capita, troubled economies in Latin America have also looked at the idea, with neighbouring Brazil and Venezuela playing catch up.

Bitcoin has proven to be a solution for many of the problems caused by inflation and subsequent capital controls. (Tech Crunch, March, 2016) As a result merchants and workers alike have started to look for an alternative and have started to use the cryptocurrency.

Bitcoin start-up BitPagos, is currently helping more than 200 hotels, both cheap and boutique, take credit-card payments from foreign tourists according to the NY Times. The money brought to Argentina using Bitcoin payments bypasses the high level of bureaucracy which is usually involved with receiving conventional payments from overseas.

A popular online retailer in the country, Avalancha, has been accepting bitcoin since last summer and has seen a large amount of bitcoin transactions grow steadily since using the cryptocurrency on the site. Avalancha offers their customers a 10 percent discount when they use Bitcoin. The reason behind this is because credit card payments cost Avalancha more than 10 percent as a result of the troubled Argentine financial system.

Looking for alternative methods such as bitcoin has led to like-minded people joining in unison and creating a bitcoin embassy in Buenos Aires; a four-story building that’s home to eight start-ups whose businesses depend on Bitcoin transactions.

From start-ups to even local politicians have shown an interest in the cryptocurrency, Argentina’s youngest mayor Martín Yezatweeted back in January about having a bitcoin agenda in place as well as regulatory approval for the popular ridesharing platform Uber.

Adopting bitcoin as an alternative for Macri aka “President Facebook” because of his big social presence would be a massive step in countering its current economic crisis. Argentina and the rest of Latin America has a lot of opportunities to push the cryptocurrency and make it more mainstream.